How to Terminate a California LLC by New BizFile System or Mail | how to close your CA LLC

hey this is attorney elizabeth potts weinstein and today we're going to talk about how to terminate your llc in california if you want to shut down your llc and stop being in business in california either because you moved to another state and set up a new llc there or because you never launched the business or you're no longer having this business you actually need to terminate it in california otherwise you're still going to get bills for the 800 a year franchise fee taxes and potentially someone could sue the llc i mean you want to close all that stuff up so how do you shut down your limited liability company in california well what you need to do is you need to file some documents to terminate it now how what docum how do you do that and what documents you file depends upon your exact situation so we're going to get into those details but before you file if you want to use the online filing system which is california's new biz file system as of 2022 you're going to need to set a few things up first and check a few things to do that online filing and also even if you're going to do old-fashioned pdf form that you print out and mail in filing there's some things you need to check on first so let's get into how to do that so the first thing that you're going to need to do is go to the biz file online system and check on your llc is it hooked up to your login account and is there any problem with it so when you go to biz file online if you're not already logged in you're going to see that there's forms that you can fill out and you may think oh i can file the termination form here and you will be wrong because there's no termination form here how it works is that you first have to be logged in and have your llc connected to your login account and then you can see the forms you can file for that llc the idea is they don't want some like random person determining somebody else's llc it actually is a good security practice however it can create some logistical problems so the first thing you're going to do is create a login you click on login if you don't already have a login you can hit the sign up button and you can create an account by just putting in your email password first name last name it's fairly fairly simple so let's assume that you have done that and you're logged in now the next part of this is getting your business connected to your login so let's say you don't have your business connected to your log i'm actually going to log out and there's no businesses because i don't have a login here what you're going to do is search for your business i'm going to put in my law firm which is a corporation but it's the same thing for doing an llc epw small business law and i click on that and it comes up down here over on the side it has a whole bunch of information which we're going to talk more about in a minute but at the very bottom if you scroll down it has request access this is where you're going to request access to your llc if you don't have access already there's a couple different ways to get access to your llc first is if you created your llc in the last month then you're going to automatically have access in this system second is if you created your llc using online filing in the last couple years under kind of the old online filing system you should have gotten an email to your email address to connect those up so you can create a login it'll already be in it'll already be in here it's really nice but let's say either somebody else created your llc or you created it using you know filing something in the mail a long time ago how do you connect it well let's look in the help folder to see how to do that if you click on help the online help is actually a pdf which is not the best help system but here we are and you scroll down to the outline for the help system and it has access to online business entity records if you click on that it'll go through how to get access so if you request access and someone else has access so let's say your lawyer your accountant legalzoom whatever someone else did online filing for you they still have access to it then when you request access it'll go to them and hopefully they will give you permission to do to access that system but let's say nobody has access because it was created 10 years ago that what they what happens is when you request access they send a letter with a pin number to the address on record for your llc so hopefully that address is right if that address is an address you have no access to it's a wrong address nothing's going to get forwarded then you're going to need to change the address before you can do this and you're changing the address you're going to do that by filing a statement of information for your llc which you can't do through this online system now because you have to be connected so what you're going to do is file it via paper i'm going to show you where the paper forms are in a sec then once you correct the address you can come back and request access and get the letter with the pin and then connect it all up so it's a lot of steps but the idea is that it makes it more secure where do you get those forms anytime you want to see forms that are the pdf forms you go to the home page for the secretary of state of california go click on business and you're going to want to find where the forms are i've always found them be under hot topics there's forms samples and fees for business entities obviously this online filing isn't working if you need to file by mail or in person so you click on limited liabilities california and then you have the various pdf forms they also have links to the online system but they have the various pdf forms the pdf forms all still exist so if you scroll down here's the one to do a statement information via pdf which you can do to change the address so you can get everything connected and then also down here we're going to look at the termination forms via pdf i'm just going to go ahead and click on that so it opens this up that's if you can't get anything connected and you want to do if i do that via pdf and we're going to look at those forms to figure that out but let's say you now have your stuff all connected what do you do so the first thing you're going to do i'm going to go ahead and log in the first thing you're going to do before you file anything is you gotta make sure you can which means that your llc has to be valid right now it cannot have administratively suspended in some way shape or form so how you do that is you it should be under your records there should be a bit a list of business of things you have access to but if it's not under your records you can just search so you can see here for my law firm which is a corporation but an llc is going to have the same stuff here that i have active status which is good that my standing which is like does this government agency have any problem with you or not with the secretary of state which is sos is good with the ftb which is the franchise tax board which is taxes is good agent do i have a registered agent yep that's good and then this is about corporate fraud stuff so hopefully that doesn't apply to you but that's good for me too all these things need to be good and you need to be active for you to be able to terminate if typically what happens when my clients have a problem terminating shutting down their llc it's because the ftb is upset with them and it'll say not good here and that's because you didn't file your last tax return and you owe them the 800 of your franchise fee that's that's usually what happens very common what happens is that someone forms an llc and they never launch the business and while the first calendar year you now don't have to pay the 800 your franchise fee number one you're supposed to still file a tax return but then the next year happens and then that 800 a year becomes due even if you literally never launched the business so before you can terminate it you have to go fix all that now occasionally i have people who are like i never launch this business i don't care i'm not going to terminate it i'm just not going to pay the 800 what happens then so people do that all the time don't get me wrong people do that not in just in california what happens is that if there's any pending lawsuits liabilities whatever with that llc you're losing protection and that you might personally be liable for things theoretically possible for the ftp to come after you personally i actually personally haven't seen it with anybody but that doesn't mean it doesn't ever happen or that they won't do that in the future so the idea of terminating things is to close the loop so you are never personally liable for anything that the llc does or doesn't do because you shut it down the correct way but honestly there's a lot of people who just let things go it is a potential risk if you do that however so where do you find the forms this is actually something that i'm hoping they're going to change because it's actually kind of messed up right now how you find the forms is you pull up your elsa you click on it and then you go under file amendment this isn't an amendment but that's where all the forms are as of right now hopefully they're going to change the language on this and be like file form or something but as of right now when i'm recording this on may 13 2022 it says file amendment when you click on file amendment a pop-up comes up and there's all kinds of forms you can file actually an amendment conversion forms and then election to terminate merger merger merger merger merger and termination so what's the difference between election to terminate and termination these names might be changed by the time you're watching this because it's not in congruence with the other terminal knowledge they use i suspect that they're using language that's like the default for this system i don't know but there's three different potential forms this protect this particular llc i pulled up only has two of them here because it's not eligible for the third form but the three forms are the short form which could be short form termination or short form cancellation which is called the pdf form which is where if your llc was created in the last 12 months and you didn't launch the business like you never actually started doing anything in the business and it's kind of the short way to shut things down the second form is called a certificate of cancellation and the pdf or here it's called a termination and this is kind of the normal way to shut down your business and we're going to go into the details of it the other form the final form is a certificate of dissolution in the pdf but here it is called elect election determinate this is if you can't do the cancellation termination thing because you don't satisfy it typically because all the members have not agreed to terminate so if there's one person that one no no it's no big deal but if there's let's say five owners and four of them the majority agree to terminate and one of them either refuses to vote or doesn't show up or has disappeared or says no it's a much longer process and to do that you actually end up filing two documents you file the election terminate and the terminate also call them the pdf the certificate of dissolution and the certificate of cancellation yes this is very confusing because they have different names in different places so first i'm going to go back to a llc that's been filed in the last 12 months so i can show you the short form so the termination short form if you formed within the last 12 months how does that look when you get to any of your term any document you're filing in this biz file system the first thing you're going to have is a big privacy warning and then you have to agree to it i'm just going to be skipping some of these things because i don't want to accidentally shut down someone's llc you put in submitter information this is your name email phone number this doesn't go in the public file but this is here in case something is messed up and they're going to contact you this is optional but i recommend putting it in there then there's some required statements so these required statements the requirements statements are things that have to be true for you to be able to use this form so this is the short form so it has to be an llc that was formed in the last 12 months which they know but then also it has to be it has no debts or other liabilities all final tax forms have been filed or going to be filed so the only liability you have is the tax form that you're going to file for like this year all known assets remaining after payment of debts have been already distributed the llc has not conducted any business from the time of filing of the articles of organization the idea is this is for a business that never launched you try to set things up it didn't work and you're cancelling before you started 50 or more of the voting interests the managers voted and to dissolve the llc and that payments received by llc for interest from investors have been returned so all that has to be true for you to use this particular termination and then when it's effective it's terminated that's the kind of most simple version you're going to pick a file date which can either be to the today's date so even if they process it a month from now it'll back date to today's date when you file this you can pick a future file date where they're going to hold it and file it then or a future effective date which means they're going to review it make sure it works and then they're going to file have it be official on that date so if you're going to do a future effective date that's what i would pick is the future effective date if you want to be like janu december 31st you want to shut out the end of the year for example i think with a short form though your business hasn't launched so you're probably just going to want to shut it down immediately i don't know why you do the other thing then you have to do the electronic signature and there's no processing fee in california for filing this kind of a document so now let's go look at the other forms that you can file so let's say that you actually did start the business so you can't use the short form but there's only one owner and you voted for this and you're fine so you can and you obviously agreed to it how does that form look same privacy warning same submitter what you're saying is a little bit different was the dissolution made by vote of all of the members of the california llc and you're going to say yes if you say no here it says that you have to have already had an election to terminate which is called a certificate of dissolution in the pdf and we're going to look at that in a minute so but let's assume that everyone voted you're going to say that all tax returns have been filed or will be filed and that upon the effective date the registration is cancelled and everything ceases in california then of course you get to pick the file date the same way and then you review it and do your signature but let's say there's ten you know five owners and only four of them agree you're going to have to do it in multiple steps so the first step you're going to do let's go find this is elect to terminate which in the pdf is called certificate of dissolution same first parts so there your election to terminate was caused by one of the following circumstances something from your articles of organization or in the operating agreement so in your llc operating agreement which is kind of like a partnership agreement you can have reasons that the llc is going to be dissolved it might be dissolved upon action of any member just deciding to dissolve it it could be dissolved if everybody dies like there's reasons you could put in there i usually don't have stuff like that it's usually based on kind of the normal things which is people voting but you can put in their specific things that happen sometimes you set up an llc only for a certain project and so it's supposed to dissolve at the end of that project so that could be one reason you could have something in there for that vote of 50 or more of the voting interests the passage of 90 consecutive days during which the llc has no members except on the death of a natural person who who's the sole member of the llc status the member including membership interest may be passed to the heirs so all the members have quit and it's been three months and there's nobody who owns it and then the entry of a decree of judicial dissolution which means a court has ordered it then you can use this form this election does not terminate it what it does is it starts the beginning so one thing whenever you shut down an llc or corporation for that matter you have to go through a process of winding up this is where you add up all the assets and you add up all the debts and use the assets to pay off the debts you terminate all your contracts you shut down all the accounts all that stuff and then hopefully you have enough assets to pay off all the debts and then anything left over you and when i say the debts i'm also including paying your last tax return the 800 your franchise fee if you owe it then at the very end you can pay out whatever's left to the owners if there's anything now by the way if you have an llc where the assets can't pay off the debts you have to notify those creditors especially if you're gonna take assets out to give to yourself instead of paying off the debts you cannot do that they only is you can only give money to yourself after the assets have paid off the debts you have to give notice to the creditors and you if there's enough money at stake they may force you to have the llc actually declare bankruptcy so let's say the llc has a thousand dollars the checking account has nothing but you have a hundred grand of debts you have money owed to people whose inventory you ordered you have loans you've taken out you know all kinds of debts that are out there somebody would want to call you on those debts and open up a bankruptcy to take that thousand dollars and divide it up because maybe they think there's actually more assets there maybe they think you have inventory whatever just something to be aware of because i think that some people think that you can just terminate an llc and all the debts go away but it is more complicated than that okay so if you have a significant amount of debt and a tiny amount of assets and you want to shut down your llc or corporation you may want to talk to an attorney you may even want to talk to a business bankruptcy attorney it may make more sense to do a bankruptcy just to tie off all those loose ends so let's say you can't do this online filing because you couldn't get it hooked up so then what do you do so let's go to the certificate of dissolution certificate of cancellation the pdf stuff which i will have linked so there's a so when you do this you're going to use a pdf and type into it you're going to sign it with a pen and you're going to mail it to the state of california and it has a place for you it gives you the information of where to mail it to you write a check for anything but for this it doesn't have any um fees so first you have the certificate of dissolution this is if 50 if you didn't have all the members the owners of the llc agree and you get the same boxes that you check you choose from you put in the number the name of the business and then the 12 digit entity so the 12 digit for my law firm is this three five one two two six zero it's going to be that number in parentheses and then you sign it and send it in the certificate of cancellation this is if the business has been in running but all the members agree here same thing you put in the name the 12 digit number you check this box because it's true otherwise we'll build a file this form and then everybody signs in the best case scenario you want all the members to sign that's just going to be the best solution so there's no debate that everyone agreed then the last one is the short form cancellation this is if the business has only been around for 12 months or less and never launched there's a short version of that and then you're going to be canceling them you do want to make sure that when you dissolve your llc you have wrapped everything up that there's no random checking accounts that are open there's no assets sitting somewhere in the name of the llc because the thing is the llc no longer exists everything needs to be resolved so make sure you take care of all that before you shut down your llc otherwise it's a legal mess this is a short version of how that works i hope this video was helpful for you if you have any questions about terminating your llc in california feel free to go ahead and ask them below in the comments and i'll try to point you in the right direction thumbs up if you found this helpful subscribe for more videos like this and if you want to support the channel in making more videos like this you can join as a patreon member the link is also below thanks a lot for watching bye

Channel: Elizabeth Potts Weinstein

Views: 30,054

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Id: Ucbq7REQUxI

Length: 20min 40sec (1240 seconds)

Published: Tue Jun 21 2022